Question

For the year ending December 31, 2019, the RJ Corporation reported book income before taxes of...

For the year ending December 31, 2019, the RJ Corporation reported book income before taxes of $579,000. During 2019: RJ's book depreciation expense was $25,000 greater than what was allowed for tax purposes due to a reversing difference; RJ accrued $17,750 of warranty expense which is not deductible until 2020. RJ recognized a $29,000 unrealized holding loss on an investment which is not deductible for tax purposes until it is sold. RJ’s book income included non-taxable municipal bond interest of $19,500. What was RJ’s 2019 income tax expense assuming a tax rate of 40%.

a. $252,500

b. $231,600

c. $223,800

d. $232,500

Business   Accounting   
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Answer #1

Option -A, $ 252,500

Particulars Amount $
Book Income before Taxes $      5,79,000
Add: Excess Book Depreciation $          25,000
Add: Warranty Expense $          17,750
Add: Unrecognized Holding Loss On Investment $          29,000
Less: Non- Taxable Income $        (19,500)
Taxable Income $      6,31,250
Tax Expense @ 40% $      2,52,500
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